Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Why Breakfast Is the Most Important Meal of the Day -- to the U.S. Economy

Tickers in this article: DLTR FDO

NEW YORK ( TheStreet) -- In the first week or so in January, Americans got an unwelcome surprise in their paycheck -- a 2% hike in the payroll tax as the temporary cut in payroll taxes ended Dec. 31.

The two-year suspension was meant to boost the economy and put more cash in consumers' pockets. With the tax break is in the rearview mirror, its elimination just may be curbing Americans spending habits and hurting the economy.

So says SymphonyIRI, a Chicago-based consumer services company.

In a white paper released Monday, SymphonyIRI notes that a U.S. family with household income of $40,000 loses $800 with the elimination of the payroll tax break, which could manifest itself in small, but measurable ways.

You may be surprised to hear one of SymphonyIRI's key warning signs: breakfast.

"Out-of-home consumption will likely drop, and specifically out-of-home breakfast categories," says Krishnakumar S. Davey, managing director at Symphony Consulting, a division of SymphonyIRI. "Consumers usually eliminate the out-of-home breakfast meal first when they cut spending."

A drop in income can also turn many families away from mass merchandise stores (at the mall or online) and turn them toward bargain outlets such as the Dollar Tree.

Not for nothing, but the Dollar Tree's (DLTR) stock price has risen from $38 per share in the first week of January to $41 per-share in the second week of February.

Family Dollar (FDO) , another bargain outlet, saw its share price fall from $72 per-share to $55 per-share from Dec. 10-31. After the payroll tax break was rescinded, the company's stock price rose to $57 per share in the first five weeks of 2013.

These aren't exactly earth-shaking numbers, but they do point to discernible changes in consumer spending patterns after the payroll tax increase.

"To date, shifts in shopper behavior are subtle, but patterns are emerging that deserve close and ongoing scrutiny," Davey says.

Dollar sales growth for all channels was steadfast at 2.1% in January and the previous month, while "dollar sales growth at mass merchandisers decreased to 3.3% from 5.3% in this timeframe. It appears that dollar stores have picked up some business from mass merchandisers," the firm reports. "Club store dollar sales growth also registered a similar decline."

Symphony reports that middle-class shoppers are spending less so far in 2013, although high-income earners (not surprisingly) are spending at their usual rate. The firm says that lower-income earners are actually shopping more, but it's because they're buying groceries to eat at home to avoid going to restaurants.

"We expect payroll tax increases will impact non-consumer packaged goods spending (such as gas, clothes, entertainment) potentially more than consumer packaged goods spending," Davey says.

This "shrinking wallets" syndrome, as Symphony calls it, could start hurting the economy. Davey expects U.S. economic activity to be "stagnant" because of the tax increases and sustained high unemployment.